Assignment of Benefits—It’s the data stupid!

When it comes to legislative reforms of Assignment of Benefits (AOB), everyone attending the Florida Chamber of Commerce’s Miami Insurance Summit noticed a brighter light at the end of a shortening tunnel.

Despite distractions of Workers Compensation and the potential repeal of No-Fault (PIP), AOB stole the Miami show; including noted reform endorsements from Chief Financial Officer, Jeff Atwater and Insurance Commissioner, David Altmaier and others.

Even unrelated panels and/or presentations morphed, to one degree or another, into an AOB discussion.  Including one noteworthy collection of media experts proving some in the mainstream have firmed their grip on the problem.  The Chamber’s newest video is a composite of a few TV expose’s revealing the need for reform.  Check it out. It’s a good one.

At this point and regardless of anything else, the data is unrefuted.  Lines are drawn.  Fence sitters of all persuasions are finding it safer to pick a side, even against trial lawyers.

Good thing; because that’s the core of the problem and the broadest opportunity for real reform.  One litmus test? Some trial lawyers serving in the legislature now propose the non-solution of regulating water extractors.  It’s been their fallback all along and its appearance now is testament both to their fear of the reform movement and their need to distract from real reforms of the one-way attorney fee statute (Fs 627.428) and Senator Dorothy Hukill’s solution, SB-1038.

I’m told the trial lawyer who authored AOB’s application to property insurance brags to this day about his idea and the largesse created for attorneys willing to go along.

That’s why this year’s AOB reform drive is different.  Sure, we’ve got to make certain that emergency remediators provide estimates, and that their contracts include 3-day back out provisions, and much more (as in SB-1038).  But, reforming the sacrosanct one-way attorney fee statute is key.

Isn’t that essentially what Insurance Commissioner David Altmaier is saying, and perhaps CFO Jeff Atwater, when quoted by Michael Moline in Florida Politics?

Chief Financial Officer Jeff Atwater said he’s seen no increase in consumer complaints to his office suggesting massive wrongdoing by insurers.  “They (consumers) would be reaching out to us,” he said. “The evidence seems to be that that is not happening.”         

And during his report to the cabinet Commissioner Altmaier stated…

“There’s no other explanation other than the one-way attorney fees…”

And, these two regulators and the facts revealed in OIR’s data call are all remarkably consistent with data from an insurer with no incentive to bake numbers—the state run, non-profit company with a 10% annual rate cap, Citizens.    It’s average water damage claim has increased from $10,000 to $20,064 from 2011 to year end 2016.  So, if as the trial bar asserts, insurance companies are not paying claims, how did the average claim payout double in five years?

The answer is in the data.

Records show that Citizens is receiving claim notices (often in the form of a suit), 23 days after the date of the loss. Three weeks pass before Citizens can even examine the scene.  That lawyers intentionally cause that delay, and then complain about it, may be the most disingenuous piece of their anti-AOB platform.

When a carrier receives 62% of its claims from an attorney or Public Adjuster well after the work has been done, at a time when the property has already been remediated with permanent repairs—how can anyone expect timely payments?

Citizens had 9,806 law suits last year.  Two thousand eight hundred (2,800) were AOB.  That’s 45% of all Citizens claims encumbered with litigation.  Only 13 firms are responsible for 60% of those suits.  In the private market, only around 11 firms are responsible for 75% of all litigation against insurers.

There are 6,000 trial lawyers in Florida. How can the Florida Justice Association (trial lawyers) defend the abhorrent practices of so few attorney firms and in so doing sully the image of the remaining 5,989 trial lawyers?

And, the phenomenon of multiple lawsuits is spreading like wild fire.  According to the Florida Justice Reform Institute (FJRI) AOB study (updated) one insurance policy can often be the source of multiple AOB claims.

Example: Citizens was confronted with two suits by holders of AOBs resulting from one claimed loss—one suit by a plumber and the other by a mitigation company. The AOB in favor of the plumber was executed two years after the loss.

Another example: one window leak gave rise to three AOBs and consequently individual lawsuits by a mitigation company, a mold testing company, and a mold remediation company. Citizens also reported numerous instances in which the insured filed its own lawsuit against Citizens, in addition to lawsuits filed by multiple AOB holders such as mold remediation and water mitigation companies.

I said it was spreading.

One private carrier reported eight instances in which it has had to defend against multiple suits regarding the same claim under the same policy:

  • Six of these instances involved two lawsuits resulting from one claim (i.e., one lawsuit filed by the holder of an AOB and one lawsuit filed by the insured)
  • One instance involved four lawsuits arising out of one claim (three AOB lawsuits and one lawsuit by the insured)
  • One instance involved three lawsuits arising from one claim (two AOB lawsuits and one lawsuit by the insured)

Ladies and gentlemen.  I’ve said it before.  The system is collapsing under the weight of a dozen lawyers backed by a handful of lawmakers in key positions or who are trial lawyers themselves.

They must be stopped.  You must stop them.

Write your lawmakers and ask that they vote for Senator Dorothy Hukill’s’ bill, SB-1038.

If it never gets a floor debate, call your lawmakers again, especially those who kept SB-1038 from getting a fair hearing and tell them they will not have your support in future elections.

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